IronNet (NYSE:IRNT) stock is plunging today on multiple negative catalysts. For one, the cybersecurity firm just reported disappointing second-quarter earnings. But two top executives are also stepping down from the company. Poor earnings aren’t the only thing driving this change in leadership, either.
Rather, Chairman and co-CEO Keith Alexander — a former four-star general — has been accused misinforming investors in an attempt to artificially inflate IRNT stock. Now investors have filed a class action complaint against Alexander as well as other top executives, including co-CEO William Welch and CFO James Gerber.
Both Welch and Gerber will be leaving IronNet. Meanwhile, Alexander will begin to serve as sole CEO. With the severe accusations against him, however, the futures of both the CEO and IronNet remain uncertain.
Here’s what investors should know as IRNT stock drops today.
What’s Happening With IRNT Stock?
As can be expected, IRNT stock is falling fast today. Shares plunged more than 36% in pre-market trading, ranking among this morning’s biggest losers. As of this writing, IRNT is now down 40% for the day, showing no signs of a rebound.
Not that investors have any real reason to hope the stock will turn around. Despite a slight rebound last week, shares are still down 50% for the month and almost 70% for the past six months. At no point in 2022 has the stock looked like a buy. But with everything that has happened recently, even more investors are jumping ship.
We may not expect high-ranking national security officials to be plugged into the meme stock world. But that’s exactly what IronNet investors are alleging of Alexander. More specifically, investors accuse the former general of trying to advantage the craze of 2021 by using his position to push up shares via underhanded means. The lawsuit alleges Alexander defrauded investors by providing “inflated revenue numbers” and “false promises of government contracts.”
Apparently, this scheme allowed Alexander to net a profit of “at least $5 million.” Further, The Intercept reports:
“IronNet, which advertises systems to help public and private clients defend against a variety of hackers and other forms of electronic intrusion, relies heavily on Alexander’s image and reputation as a former intelligence official. ‘As commander of U.S. Cyber Command, we had responsibility for defending the nation,’ says Alexander in a promotional video that runs on the company’s homepage.”
IronNet came public back in August 2021 through a special purpose acquisition company (SPAC) merger. It didn’t take long for the newly formed IRNT stock to skyrocket, as retail trading squeezed it to impressive highs. The company’s lofty valuation did worry some experts. But others assumed IronNet would grow into it, citing the prospects of the sector. Given how far shares have fallen, though, it’s clear valuation is the least of the company’s problems.
No one from IronNet has commented on the accusations yet, but the writing is on the wall. IRNT stock has been a questionable investment for months. This is just the final nail in the coffin.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
